Department of Health

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Purpose
To determine if Medicaid overpaid Ambulatory Patient Groups (APG) claims because of deficiencies
in the claims processing and payment system. The audit covered the period December 1, 2008
through March 31, 2012.

Background
The Ambulatory Patient Groups (APG) payment methodology covers most medical outpatient
services. Claims are reimbursed based on a patient's condition and complexity of service. The
APG system was adopted by the Department of Health (Department) in an effort to more
accurately pay providers for services rendered. Prior to the APG implementation, outpatient
services were paid under an all-inclusive reimbursement model. The patient's condition and
complexity of service were not factored into the claim payment. Under the new APG system, the
Department assigned providers new APG rate codes and deactivated the rate codes used under
the previous payment methodology. The Department phased in APGs beginning with hospital
outpatient departments and ambulatory surgery centers on December 1, 2008. APGs were then
implemented in freestanding diagnostic and treatment centers and freestanding ambulatory
surgery centers on September 1, 2009. The Department uses its automated eMedNY system to
process Medicaid claims and make payments.

Key Findings

Providers used five prohibited combinations of APG reimbursement codes on 6,615 claims
which resulted in improper Medicaid payments totaling $1,204,186. These improper payments
occurred because the Department did not properly design automated system edits to deny
claims with the prohibited rate code combinations.

For example, Medicaid paid a provider $149 for a clinic visit that was billed under one particular
rate code. Later, the provider submitted a second claim for the same service to the same
recipient on the same date using a different rate code, and Medicaid paid the provider $128 for
this claim. Because the edit was not programmed to stop this particular rate code sequence, the
applicable eMedNY edit did not prevent payment of the second claim.

We also identified $933,399 of duplicate payments made to providers for the same services
under both the old and the new (APG) payment methodologies. Furthermore, the Department
must reprocess $4,286,603 of payments made under the pre-APG methodology.

Key Recommendations

Review the 6,615 instances of improper payments (totaling $1,204,186) and make recoveries,
as appropriate.

Design and implement eMedNY system edits which prevent the improper payments we
identified.

Review the 8,819 duplicate payments (totaling $933,399) and make recoveries, as appropriate.

State Government Accountability Contact Information:Audit Director: Brian MasonPhone:(518) 474-3271; Email:StateGovernmentAccountability@osc.state.ny.usAddress: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236